tv Nightly Business Report PBS December 1, 2011 7:00pm-7:30pm EST
>> tom: from saks to tiffany's, luxury retailers are shaping up to be the big winners this holiday season. a look at why are big spenders spending again. and massachusetts ups the ante in dealing with america's foreclosure crisis. the state's attorney general is suing five of the nation's biggest banks. it's "nightly business report" for thursday, december 1. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> tom: good evening and thanks for joining us. after a year, massachusetts broke away from national talks aimed at fixing the nation's foreclosure mess. the state's attorney general martha coakley today sued five major banks, alleging deceptive foreclosure practices. >> susie: tom, the suit comes as talks drag on between major banks and attorneys general from around the country. it targets bank of america, j.p. morgan chase, wells fargo, citigroup, gmac mortgage, and
foreclosure processing firm mers corp. >> tom: in response, the banks said they believe a broader, coordinated settlement is better for consumers. wells thinks today's suit would do little to help massachusetts homeowners, while j.p. morgan chase believes a broader settlement could "bring immediate relief to massachusetts borrowers." >> susie: this suit surprised real estate experts, including our guest, susan wachter, professor of real estate at the wharton school at the university of pennsylvania. >> susie: thanks for joining us tonight. >> my pleasure. >> susie: put it in perspective. why is this lawsuit so important? >> this was going to be a blanket agreement that would help put behind us the robo signing controversy, the delays that are blowing up, and what is going to be a long road to recovery in any case. so this raises the uncertainty across the board. >> susie: and is there any
indication that other states will follow the massachusetts lead and also sue the banks? >> it's possible. there are also state that is stepped out of the associations negotiations. it means a negotiated settlement is less likely and throws a monkey wrench into the proceedings. that is likely to present a legal quagmire. >> susie: i understand the banks were getting close to some kind of settlement, the price tag i see is $25 billion. now this going the route of a lawsuit, what does this mean for the bank? >> well, one, it means uncertainty, and secondly t means the potential of further lawsuits, and increased liability going forward across the nation. >> susie: and does it -- >> especially if the entire negotiations fall apart, there's a real danger of that.
and it could mean bigger sums of money to individual states rather than a broad based settlement? >> absolutely. and it's not just that, it's also the lawsuits that might come from this. >> susie: what does the lawsuit mean for the homeowners? >> it may mean a stronger settlement for massachusetts homeowners. so for them, that would be a positive outcome. >> susie: and it seems like from what you're saying that this process could drag on. there aren't going to be negotiations. there's a lawsuit. so what could this potentially mean for the housing sector, and the recovery of the housing sector? >> it was hoped for by the blanket negotiated settlement was that there would be an overhaul of the industry and
the foreclosure process and new guidelines and new rules that would enable all partys to come to the table and bring closure to this ongoing issue, but that may now be in question. >> susie: how do you think the whole thing will play out? at the end of the day what's going to happen next? >> there may be a negotiated settlement. this may be just one stage. this may provoke a change in the terms thaf negotiated settlement. we'll just have to wait and see. >> susie: all right. thank you so much for coming on the program and explaining it all. we really appreciate it. >> my pleasure. >> susie: and we've been speaking with julia wachter from the wharton school. >> tom: a rise in weekly jobless claims helped put wall street on edge ahead of tomorrow's november employment report. new claims for jobless benefits rose by 6,000 to 402,000 in the past week, and that helped put an end to the blue-chips' three day winning streak. the dow fell almost 26 points,
the nasdaq was off five, and the s&p 500 lost two points. trading volume fell from yesterday's pace with 854 million shares moving on the big board and 1.8 billion on the nasdaq. still ahead, when enron failed, it brought down the accounting firm arthur andersen. tonight, we look at where some of its employees have landed and the lessons learned from enron's implosion. >> susie: buyers snapped up cars in november, making it one of the most successful months for auto sales since the cash for clunkers incentive two years ago. sales at chrysler were up 45%, with big gains across the board on its models. ford reported a 13% increase, while general motors and toyota came in just under 7%. honda sales were stuck in reverse, down more than 6%. it was one of the few auto makers to report a drop in sales. >> tom: it's not just cars-- consumers were also shopping at their favorite retail stores in november.
black friday weekend traffic helped boost sales, thanks to early hours and special promotions. the nation's retailers reported an average gain of more than 3% in november-- not as high as last year, but a good start for the critical holiday season. among the big winners, stores that specialize in luxury goods. as suzanne pratt reports, it looks like shopping bags will be stuffed with high-priced items this christmas. >> reporter: it is one of the great mysteries of this holiday season. why is luxury retail expected to do so well when the economy is still so fragile? some say it's pent-up demand for $3,000 handbags and diamond jewelry after too many years of austerity. chris paradysz studies consumer behavior, and thinks luxury shoppers have stopped feeling guilty about their wealth. >> the perception from others about people who can afford to shop there doesn't seem to have affected the buying patterns at all, where it certainly did in 2009.
>> reporter: retail analyst dana telsey says it's simple mathematics-- money in wallets that's whetting appetites for high-prices goods. >> the reason luxury retailers are part of the bright spot is, if you look at household net worth, it's going up all over the world-- not at the same rate as it had been, but it still is moving higher. >> reporter: manhattan's fifth avenue is the epicenter for luxury spending in the u.s. even on december 1, the sidewalks are already brimming with holiday browsers and shoppers. but studies predict it will be the richest of the rich that do most of the luxury spending this year. we're not talking about the 1% that protestors are so angry at; we're talking about the top quarter of that 1%. >> the big growth is coming from the global sector, as well as the more super-luxury, the half of 1%, the quarter of 1% where discretionary spending is really not the issue. >> reporter: paradysz forecasts those super-luxury shoppers will
help ring up a 10% increase in luxury sales this christmas. that compares to a leaner 3% gain in overall retail sales. brands like gucci, prada, and louis vuitton will be the beneficiaries, while high-end stores like saks and tiffany's are also expected to shine. but here's a curious fact-- it turns out luxury shoppers are also procrastinators, so it will likely be late in the season before we see the really big spenders begin to spend. suzanne pratt, "nightly business report," new york. >> susie: one place americans weren't shopping at in november- - j.c. penney. the retailer said its sales fell 2%, blaming the drop on its late black friday opening time. the company said, "its decision to respect thanksgiving day for families and open at 4:00 am on friday, as it had in prior years, adversely impacted black friday sales." retail analyst howard davidovitz says it was a big mistake.
>> penney's made a terrible blunder. at a time when everybody's fighting for market share and the consumer wants convenience, penney's blew it. it's that simple. and you have to look to the management for that error. they won't do it again next year, and that's what they should have said. >> susie: but davidovitz says penney's did a great job in online sales. the retailer posted a 12% jump in web traffic over the big shopping weekend.
>> tom: a crittedical period. how officials describe the days leading up to next week's european summit. the only is she coming up with a big enough solution to europe's growing debt crisis. kathy schwartz joins us. is this coming week do or die for the debt solution? >> that's the way it is billed. it has been billed that way many times before, and there's an initial period of relief and euphoria that they're on the job, and then the plan somehow doesn't quite materialize the way we expect. and we go back to through this cycle of disappointment and getting a new plan. >> tom: last time it was greece in trouble. then spain. and even portugal and france showing cracks. it seems to be more know
tension filled sdntd it? >> absolutely. and part of the problem has been the funding for the banks has dried up. that's a real concern. when you get to the point where liquidity is disappear that has to be address. >> tom: that's what they tried to address yesterday, essentially allowing the european banks to borrow at a low interest rate. other than that is the u.s. federal reserve on the sideline ?s >> i'd say they're act i felt talking, but there's notwithstanding -- ac if there' going to be grand plans it has to come from the european banjs. >> tom: don't expect the u.s. to buy european debt? >> i wouldn't think that's in the cards. >> tom: the u.s. federal reserve does have a big meeting coming up. do you anticipate more stimulus? >> not in this meeting. there's enough data to show the economy is doing okay. they'll stay on the sideline.
i wouldn't be surpriseed to see something down the road in the first or second quarter of next year. >> tom: talk about bond investors approaching the sound and fleury. the 10 year note. where due find value if you're a fixed income ibvestor? >> it's hard. the zero interest rate policy. we're looking at investmented grade corporate bonds. the corporate sector is in decent shape. that's someplace to get a little extra yield. if you're a little more daring you can go into high yield bonlds, but you're taking a risk that the economy is going to continue at a reasonable pace. >> tom: the treasury yield went lower and the price went
higher. do they sit on the gains or look to move the money to corporate bonds? >> well, you could. i mean, you could take some profits because mathematically, rates can't go much below zero. so at some point you want to take the gains. except that if you move totally out of treasuries, you have no diversification that's really secure against all the volatility in the market. so i would say don't take all of your profits here. don't bet the ranch, but take the lower yield. >> tom: so you think the yields could move mow lower? >> i that could. i don't think there's a lot of room on the downside, but next year if the economy is soflt, they could drift lower again. >> tom: thanks for the info. kathy jones can the guest with charles schwab. >> susie: moving from fixed income to stocks. could it repeat theeral ?e not today at least. a lot of what happens tomorrow depends on the big employment report, and the estimates are all over the map sm. people
say it's a great number, and others say it's going to disappoint. we'll see. >> tom: digest the big gains from yesterday, and wait for the big number tomorrow morning. that's where we're at as we get ready to cue up tomorrow's market focus. the major stock indices ended with small changes after the big rally yesterday and ahead of tomorrow's report on employment. the s&p 500 dipped in and out of positive territory during the session, finally ending with just a fractional loss today. weighing on the market-- financial stocks. the sector lost 1% but the best sector was technology, up six-tenths of a percent among the financial stocks seeing selling pressure was j.p. morgan, one of the targets of the foreclosure lawsuit filed by the state of massachusetts against mortgage lenders.
j.p. morgan fell more than 1.5%. shares have been trending lower since their april high. boeing was the best stock in the dow, adding to yesterday's sharp rally with today's better than 3% increase. this is the stock's first close over $70 per share since august 1. today, the european union said it has complied with a deadline to end illegal trade subsidies to boeing competitor airbus. the two plane makers have been fighting a bitter trade war over government support. yahoo may soon find itself the target of multiple buyout offers, valuing the company between about $17 and $20 per share. the latest may come from a group looking to carve up yahoo. its partner in china, alibaba, would buy the 40% stake yahoo owns. soft-bank in japan would buy yahoo japan, and private equity firms blackstone and bain would pick up the u.s. operations. other private equity firms have offered to buy yahoo or take a minority stake. yahoo continued climbing today,
adding another 3% on twice its usual volume. a move to $17 would take it to its highest price since may. the reported offers range from $16.60 to $20 per share. troubled cellular network company clearwire got some good news today. partner sprint agreed to pay more than $1.5 billion over the next four years for using its wireless data network. sprint is clearwire's biggest customer and largest shareholder. clearwire shares jumped 14% after saying it will be able to make a $237 million loan payment today. despite strong chain store sales for retailers, barnes and noble stock fell 16% after reporting a quarterly loss. yoga clothing retailer lululemon dropped 5% after disappointing quarterly sales. and sears lost almost 5%%. it will offer steep discounts tomorrow and saturday hoping to lure in shoppers. in the commodity market, precious metal palladium shot up
more than 3%, putting together its best four day rally in a year. palladium is widely used in catalytic converters in cars and trucks. and with strong november auto sales, palladium prices continued rallying. and natural gas caught a bid today after government data showed a drop in supplies from all-time in the previous week. a colder forecast for next week also helped push prices up. and that's tonight's "market focus." >> susie: it's been a decade since enron imploded in one of the biggest corporate scandals in u.s. history. the energy giant's collapse also took down the accounting firm arthur anderson. as we continue our series, "enron: ten years later," diane eastabrook tells us how the demise of andersen affected its employees and the accounting industry. >> reporter: at altair advisors in chicago, workers are wiring the company's latest addition, a new training room. >> when we moved in here, it was
just this half of the floor... >> reporter: brett rentmeester says his wealth advisory firm's physical expansion illustrates how far he and altair have come in a decade. rentmeester was among a dozen former employees in arthur andersen's private client services division who started altair when the former accounting giant went bust over government charges that it helped cover up the enron scandal. >> sometimes you jump and sometimes you get pushed to jump, and this was a case where we got pushed. and i think... considering how quickly we had to do things, i think we did an excellent job becoming entrepreneurs on the go. >> this building was the corporate headquarters for arthur andersen. before the company collapsed, it employed about 85,000 people worldwide. for graduating college students, getting a job with andersen was like getting a ticket to the big leagues. when we met matt mittman in the spring of 2002, he was finishing up a master's degree in accounting from northern illinois university and heading to a job at arthur andersen. but that job fell through when the accounting firm collapsed.
today, mittman is ten years older, with a wife and two young children. after graduation, he got an accounting job, then another, and now is a senior tax manager at crowe horwath. for mittman, the andersen experience still lingers with him, both personally and professionally. >> it certainly has made me more cautious, just in general, just thinking through and looking at the scenarios, situations, dissecting and analyzing, as well as just understanding that there are problems that are definitely outside of my control. >> reporter: andersen's role in the enron scandal shook the accounting industry, leading to tougher federal standards under the sarbanes-oxley act. the company's implosion also left the accounting industry with four big firms, instead of five. accounting professor thomas lys from northwestern university's kellogg school of management says less competition has been costly. >> that certainly puts restriction on price competition or service competition, which in
turn increases the cost. >> reporter: for altair advisers, the last ten years have been good ones. the firm has tripled in size. still, founding partner jason laurie says watching what happened to andersen was a valuable business lesson. >> just because you're a big firm, just because you've been in business a long time doesn't necessarily mean that you'll stay in business. >> reporter: diane eastabrook, "nightly business report," chicago. >> susie: tomorrow, we talk with the woman known as the "enron whistle blower". sherron watkins was the enron vice president who alerted then- c.e.o. ken lay of accounting irregularities at the energy giant. >> tom: here's what we're watching for tomorrow: jobs-- specifically how many the economy lost or gained. we'll find out from the labor department's november employment report. and tomorrow's market monitor is looking for strength in consumer spending. he's james paulsen, chief investment strategist at wells capital management.
>> susie: raj rajaratnum has been ordered to begin his prison sentence on monday. a judge denied the convicted hedge fund manager's request today to remain free while he appeals his conviction and 11- year prison sentence. that's the longest term ever imposed in an insider trading case. lawyers argued that rajaratnam is not a flight risk, but prosecutors and the judge disagreed. >> tom: 13 people face charges in connection with a year-long federal investigation into micro-cap stocks. these are stocks of companies with market values usually under $100 million. the defendants include corporate officers, lawyers, and a stock promoter who allegedly used secret kickbacks to get investments for thinly traded stocks. they are accused of criminal and civil charges, including mail and wire fraud. trading in seven companies was halted today as result of the investigation.
>> susie: when it comes to teaching kids about savings, the concept of building money over time isn't always easy to explain. in tonight's "kids and cash," james wood has a neat trick to do just that, and it includes a math lesson. he's author of "from ramen to riches." >> to help your kids visualize how the value of a dollar can
change over time, tell them about the rule of 72. this handy formula is useful for approximating how long it might take an invested dollar to double, or to show the impact of inflation over time. simply divide 72 by the expected interest rate to estimate how long it might take an investment to double. so, an investment expected to earn 8% per year will roughly double in nine years. that's 72 divided by eight equals nine. similarly, the formula would show us that a basket of goods selling for $100 today would cost $200 24 years from now if we assume a 3% inflation rate. take 72 and divide by three to get the result. in this example, you'd need twice as much money to buy the same things in 24 years. that's a great way to show the harm that inflation can do. its not hard to do the math. the results should make for interesting dinner conversation. i'm james wood. >> susie: and finally, as we wind down the year, how many unused vacation days do you have? if you're like most americans,
you are due time off, but not taking it. a new survey from expedia finds many employees will forfeit two of their paid vacations days this year. when the numbers are tallied, those unused days add up to more than $34 billion. tom, survey after survey show americans work too hard and are vacation deprived. but workers in countries like singapore and brazil see the importance in kicking back and don't let any days go to waste. >> yeah, and the time is ticking in the end of the calendar year coming up in a matter of weeks, susie. have to get the vacation days n. >> susie: won't get complaints from me. >> susie: that's "nightly business report" for thursday, december 1. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. in the meantime, we leave you with the white house tree lighting. "nightly business report" is made possible by: